Some surprising news out of the Department of Transportation today as Ray LaHood suggests that the Obama administration is considering taxing people based on how many miles they drive. A vehicle miles traveled tax, as the proposal is often called, has been under consideration in states like Rhode Island and Idaho and has, not surprisingly, proven pretty unpopular. First, it’s a tax. Second, it requires the installation of a GPS chip to record miles driven and beam the information to centralized computers. Sorry, did that sound Orwellian? I meant a small transponder that informs the government of your driving habits.

Crap. This is hard to sell.

In the interview with the Associated Press, LaHood set the vmt in opposition to a gasoline tax, which he “firmly opposes,” at least during the current recession.

Ezra Klein thinks this might be better than the gasoline tax, however:

There’s some logic to that. Gasoline is a very visible, and very unpredictable, cost. Every summer, particularly in recent years, the price of fuel becomes a tier one political issue, in large part because it rises so much from the winter. It’s hard to imagine a gasoline tax being sustained. Vehicle miles traveled, by contrast, is both steadier and less visible.

But the best way to get people to buy more gas-efficient cars–which, along with raising revenue, is the point of the exercise–would be to impose a tax at the time of purchase based on gas mileage. It might go something like this:

Assume that a car will be driven 120,000 miles.

Calculate how many gallons of gas at the city mileage rate would be used.

Impose a gas tax (at whatever amount per gallon is deemed appropriate at the time of purchase.

Under this system, if we were to impose a dollar per gallon tax, a gas guzzling SUV that gets 12 mpg would have a tax of $10,000, while a zippy little hybrid that got 40 mpg would have a tax of $3,000. This would influence consumer decisions far more than that day’s price at the pump.

Comments

I don’t get it. Why not just tax the petrolium? Countries in EU are doing that, and it’s working here, gasoline conpsumption is usualy important when somebody buys a new car even if that somebody couldn’t care less about the enviroment.
This is because gasoline costs here between 2x and 4x the price in the US.

Perhaps we should keep the gas tax, but earmark it for only subsidies for non-fossil-carbon-burning vehicle miles traveled. That way the only people who would have to worry about having their mileage tracked would be those who wanted subsidies. Also, it would provide an incentive for new non-fossil-carbon-burning technology development.

It would make sense to apply taxes on the basis of gallons instead of purchase price, so that price fluctuations would be revenue-neutral. But it should be done at the pump. Applying it at the showroom would cause people to put off new car purchases. It would be (short-term) cheaper for them to keep driving their polluting gas hogs.

Fuel economy should also be calculated based on gallons per mile (or hundred miles) instead of miles per gallon. That would help people get a more realistic view.

But a gas tax at the pump is superior to a tax at purchase because it taxes people’s actual driving habits and environmental impact.

For instance, I have an SUV (or, for my purposes, a Greyhound-Pack-Transportation-Vehicle), but I burn less/i> gas than many hybrid owners, simply because I drive maybe 2-3 miles a week (I walk or take the bus in to lab). Why should I be penalized for other people’s driving habits, when I’ve adapted mine to minimize my impact?

I agree that the only fair way to tax automobile use is a gasoline tax. It doesn’t do much damage to drive a car; the damage is done by burning gasoline. Ergo, we should tax the consumption of gasoline. Moreover, this is by far the easiest tax to apply. I would, however, suggest a slight modification to the gasoline tax structure: make it fluctuate inversely with prices so as to maintain a constant, guaranteed upward price expectation. Here’s how it works:

Congress passes a law declaring the net cost of gasoline (price plus tax) for each of the next ten years. That net cost will show a steady increase of, say, $0.25 per year. So if the price today is $2.00 per gallon, it is guaranteed to be at least $3.00 per gallon four years from now and $4.00 per gallon eight years from now.

This doesn’t mean that all prices will be the same everywhere. Instead, the government calculates the average price of gasoline all over the country for year X and uses that figure to calculate the tax on gasoline for year X+1. Gasoline sellers are still free to compete on price. But the public gets the economic signal that the price will steadily increase.

It is possible that the tax might go to zero if the average price of gasoline exceeds the projected net price. If that happens, the government loses tax revenue but the consumer is given some relief if gasoline prices suddenly spurt up.

The net effect is to give people clear pricing signals so that they can make rational choices in purchasing new automobiles.

Erasmussimo, Um, no, that would be a very very bad idea. Since the consumer would end up paying it anyways, suppliers would be given an incentive to push prices right up to the government mandated cost. If you want to raise the cost of gasoline across the board (which has good and bad features) just increase the per gallon tax. Changing the tax if gas prices go up removes the entire purpose of the tax. It reduces government income, it creates a much harder to understand cost, and it screws the supply demand curves to hell.

Robert, I think you misunderstand my proposal. This method preserves price competition. Competition would be no different than it is now. Let’s walk through the numbers.

Suppose that last year’s average price of gasoline (before taxes) is $2.17 per gallon, and the Congressional mandated minimum price is $3.00 per gallon. The gasoline tax would therefore be $0.83 per gallon, and this would be charged to all gasoline retailers. If two gasoline stations across the street from each other both pay $1.85 per gallon, then they would both be required to charge a minimum of $2.68 just to break even. However, they have to make a living, and so each marks up his price. Joe’s Gas might charge $3.00, but Jack’s Gas might want to undercut Joe and sell his for $2.95, hoping to make up in volume what he loses in profits. So the same competitive forces are at work in this scheme that are at work today.

People who like the idea of using GPS to measure motion clearly don’t understand how GPS works. If the receiver is at rest in an area of poor reception — say under trees — the measurement error may grow large, into hundreds of meters, so that the position is seen to dance around the error range, giving the impression that the receiver has more motion than it does. While a vehicle is parked overnight on a treelined street, the recorder could rack up thousands of miles of accumulated travel.

(A handheld Garmin Etrex once clocked me at 127 km/hr while I was walking downtown.)

If the recorder measures motion only when the ignition is on, the noise problem is still there, and it will be especially apparent in the concrete canyons of bit cities where the L-band downlinks will be subjected to multipathing, causing ghosts, which can really gum up the works.

Jay, tax policy isn’t a Democratic monopoly; the Republicans have tax policy, too. They prefer lower taxes than Democrats, but they’re not opposed to taxes in principle, or to the idea of assigning specific taxes to specific activities. So, however you approach it, everybody uses taxes for “social engineering”.

But if I know this years gas average+next years tax= $3.00
I can just sell at a shade under $3.00 to station owners, give them incentives to stay with me, and still make more then I would keeping the price down and having the government raise the prices back up to $3.00 . It’s actively providing incentives to price fix today at tomorrows set price. Hell, throw in a way to give free gas that doesn’t trigger the averages, or equiv giveaways, and I could even make an end buyer happy while making more money, and screwing you (the govt) out of a needed revenue stream. A flat tax with well hidden (but predictable) variables going into its non periodic creation makes gaming the system much, much harder.

A much better idea then a gas tax is a tax on engine displacement. This could be collected by the states at vehicle registration time. Since engine displacement has the biggest single effect on fuel efficiency, this would provide a direct incentive to purchase fuel efficient cars, in addition to favoring hybrids which have smaller gasoline engines then equivalent non-hybrid vehicles. The tax could be escalating, with, for example, a 4 liter vehicle taxed at 4 times the rate as a 2 liter vehicle.

SLC, the problem with an engine displacement tax is that it does not take into account how much driving the owner actually does. A person owning a car with a big engine displacement, BUT who drives it rarely, pays a higher tax than a person with a small engine displacement, but drives it a lot. What’s our goal here: to get people to buy small cars or to reduce dependence upon fossil fuels? If our only goal is to get people to buy small cars, and we don’t care about CO2 emissions or dependence upon fossil fuels, then the engine displacement tax is the best way to go. If our goal is to reduce CO2 emissions and dependence upon fossil fuels, then the gasoline tax is the best way to go.

The problem with the gas tax is that it is a flat tax that penalizes both high efficiency vehicles and low efficiency vehicles the by the simple fraction of the amount of fuel they consume. On the other hand, the displacement tax can be escalated so as to penalize the low efficiency vehicle much more (in my example, the penalty was a factor of 4).

However if Mr. Eramussimo is concerned about what I would consider a pathological case, then impose both a displacement tax and a gasoline tax.

Then impose both a displacement tax and a gas tax. That sends the message drive less with a more fuel efficient vehicle.

By the way, fuel efficient doesn’t necessarily meant small. I drive a 2004 Honda Civic EX which tips the scale at some 2600 pounds and gets over 30 mpg in suburban driving and over 40 mpg on the highway. Todays’ vehicles with quad multi-port fuel injected engines put out twice the power that vehicles of the same displacement did 30 years ago.

But a gas tax at the pump is superior to a tax at purchase because it taxes people’s actual driving habits and environmental impact.

For instance, I have an SUV (or, for my purposes, a Greyhound-Pack-Transportation-Vehicle), but I burn less/i> gas than many hybrid owners, simply because I drive maybe 2-3 miles a week (I walk or take the bus in to lab). Why should I be penalized for other people’s driving habits, when I’ve adapted mine to minimize my impact?